The only solution I found was to download the ioquake3 source code. There are several files in the qcommon and sys directories that have references to “steam”.
It didn’t hurt anything to comment them out and build my own version of the engine
with cygwin. I don’t use steam, but there are some good games on the net through the master server… crom ctf is hot at times and crom ffa, as well as adults only servers. There is a lot of action in europe, if you don’t mind a little lag. There’s even some work being done on new mods. Good luck to you.

This is a Steam error when attempting to run the official Quake 3 client. As far as I know the Steam Quake 3 does not have any Steam integration so I think the error is reported by Steam not Quake 3. It sounds like Steam.dll needs to be copied to the Quake 3 folder but I don’t know Steam well enough to confirm this.

This is not related to the ioquake3 source code in qcommon and sys directories for finding the Steam Quake 3 install directory.